EUFEMIA EVANGELISTA, MANUELA EVANGELISTA, and FRANCISCA EVANGELISTA, petitioners,

vs. THE COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX APPEALS, respondents
Facts:
Herein petitioners seek a review of CTAs decision holding them liable for income tax, real estate
dealers tax and residence tax. As stipulated, petitioners borrowed from their father a certain sum (P59,
1400.00) for the purpose of buying real properties. Within February 1943 to April 1994, they have bought
parcels of land from different persons, the management of said properties was charged to their brother
Simeon Evangelista evidenced by a document. These properties were then leased or rented to various
tenants.
That total amount collected as rents on their real properties was P9,599.00 while the expenses
amounted to P3,650.00 thereby leaving them a net rental income of P5,948.33;
That on 1946, they realized a gross rental income of in the sum of P24,786.30, out of which
amount was deducted in the sum of P16,288.27 for expenses thereby leaving them a net rental
income of P7,498.13;
That in 1948, they realized a gross rental income of P17,453.00 out of the which amount was
deducted the sum of P4,837.65 as expenses, thereby leaving them a net rental income of
P12,615.35.
On September 1954, CIR demanded the payment of income tax on corporations; real estate
dealers fixed tax, and corporation residence tax to which the petitioners seek to be absolved from such
payment.
Income Tax: P6,157.09
Real Estate Dealers Tax: P527.00
Resident Taxes of Corporation: P193.75

TOTAL TAXES DUE

P6,878.34.

The petitioners instituted a case in the CTA with a prayer that they be absolved from the payment of the
taxes in question. After appropriate proceedings, CTA rendered a judgment holding them liable for the
income tax, real estate dealer's tax and the residence tax for the years 1945 to 1949. A petition for
reconsideration and new trial having been subsequently denied, the case is now before the SC for review.
Issue: Whether petitioners are subject to the tax on corporations.
Ruling:
The Court ruled that with respect to the tax on corporations, the issue hinges on the meaning of
the terms corporation and partnership as used in Section 24 (provides that a tax shall be levied on
every corporation no matter how created or organized except general co-partnerships) and 84 (provides
that the term corporation includes among others, partnership) of the NIRC.
Pursuant to Article 1767, NCC (provides for the concept of partnership), its essential elements are: (a) an
agreement to contribute money, property or industry to a common fund; and (b) intent to divide the profits
among the contracting parties.
The first element is undoubtedly present for petitioners have agreed to, and did, contribute money and
property to a common fund. As to the second element, the Court fully satisfied that their purpose was to
engage in real estate transactions for monetary gain and then divide the same among themselves
because:

1.
The common fund was not something they found already in existence nor a
property
inherited by them pro indiviso. It was created purposely, jointly borrowing a substantial portion thereof
in order to establish said common fund;
2.
They invested the same not merely in one transaction, but in a series of
transactions.
The number of lots acquired and transactions undertake is strongly
indicative of a pattern or
common design that was not limited to the conservation and
preservation of the aforementioned
common fund or even of the property
acquired. In
other words, one cannot but perceive a
character of habitually peculiar to business transactions engaged in the purpose of gain;
3.
Said properties were not devoted to residential purposes, or to other personal uses, of
petitioners but were leased separately to several persons;
4.
They were under the management of one person where the affairs relative to said
properties have been handled as if the same belonged to a corporation or business and
enterprise operated for profit;
5.
Existed for more than ten years, or, to be exact, over fifteen years, since the first property
was acquired, and over twelve years, since Simeon Evangelista became the manager;
6.
Petitioners have not testified or introduced any evidence, either on their purpose in creating
the set up already adverted to, or on the causes for its continued existence.
The collective effect of these circumstances is such as to leave no room for doubt on the existence of said
intent in petitioners herein.
Also, petitioners argument that their being mere co-owners did not create a separate legal entity
was rejected because, according to the Court, the tax in question is one imposed upon "corporations",
which, strictly speaking, are distinct and different from "partnerships". When the NIRC includes
"partnerships" among the entities subject to the tax on "corporations", said Code must allude, therefore, to
organizations which are not necessarily "partnerships", in the technical sense of the term.
Thus, for instance, section 24 of said Code exempts from the aforementioned tax "duly registered general
partnerships which constitute precisely one of the most typical forms of partnerships in this jurisdiction.
Likewise, as defined in section 84(b) of said Code, "the term corporation includes partnerships, no matter
how created or organized." This qualifying expression found in Section 24 and 84(b) clearly indicates that
a joint venture need not be undertaken in any of the standard forms, or in conformity with the usual
requirements of the law on partnerships, in order that one could be deemed constituted for purposes of
the tax on corporations. Accordingly, the lawmaker could not have regarded that personality as a
condition essential to the existence of the partnerships therein referred to.
For purposes of the tax on corporations, NIRC includes these partnerships - with the exception only of
duly registered general co partnerships - within the purview of the term "corporation." It is, therefore, clear
that petitioners herein constitute a partnership, insofar as said Code is concerned and are subject to the
income tax for corporations.
As regards the residence of tax for corporations (Section 2 of CA No. 465), it is analogous to that
of section 24 and 84 (b) of the NIRC. It is apparent that the terms "corporation" and "partnership" are
used in both statutes with substantially the same meaning. Consequently, petitioners are subject, also, to
the residence tax for corporations.
Finally, on the issues of being liable for real estate dealers tax, they are also liable for the same
because the records show that they have habitually engaged in leasing said properties whose yearly
gross rentals exceeds P3,000.00 a year.

As regards the residence of tax for corporations, section 2 of Commonwealth Act No. 465 provides in part:
Entities liable to residence tax.-Every corporation, no matter how created or organized, whether
domestic or resident foreign, engaged in or doing business in the Philippines shall pay an annual
residence tax of five pesos and an annual additional tax which in no case, shall exceed one
thousand pesos, in accordance with the following schedule: . . .
The term 'corporation' as used in this Act includes joint-stock company, partnership, joint account
(cuentas en participacion), association or insurance company, no matter how created or
organized. (emphasis supplied.)
It is apparent that the terms "corporation" and "partnership" are used in both statutes with substantially
the same meaning. Consequently, petitioners are subject, also, to the residence tax for corporations.
Lastly, the records show that petitioners have habitually engaged in leasing the properties above
mentioned for a period of over twelve years. Thus, they are subject to the tax provided in section 193 (q)
of our National Internal Revenue Code, for "real estate dealers," inasmuch as, pursuant to section 194 (s)
thereof:
'Real estate dealer' includes any person engaged in the business of buying, selling, exchanging,
leasing, or renting property or his own account as principal and holding himself out as a full or
part time dealer in real estate or as an owner of rental property or properties rented or offered to
rent for an aggregate amount of three thousand pesos or more a year. . . (emphasis supplied.)
Wherefore, the appealed decision of the Court of Tax appeals is hereby affirmed